Q:

Hi Scott, how much do the kids need to earn in order to contribute to IRAs?  Also, does the amount they contribute need to be less than or equal to their earned income?

For instance, could I pay each child $1 annually from my business and then contribute $7,000 to their IRAs?

A:

Hi Small Business Owner,

Their contribution is limited to their earned income.  $1 of earned income would mean at most a $1 contribution.  That said if you paid the kids $2,000 for work, my guess is it would be a tax deduction for your business and not taxable to the kids.  Make sure to coordinate with the accountant as it is all interconnected to your (and their) tax return.  You have up and until 4/15 of next year to make a 2024 Roth or IRA contribution…although they would need to earn the income in 2024 to have earned income that qualifies for 2024.

Best,

Scott

All questions are real questions, but for confidentiality reasons are re-written.  They are not intended as individualized advice.